2024, infrastructure development will be accelerated
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - 2024, pembangunan infrastruktur dikebut
9 November 2023
By: Trimurti & Euis Rita Hartati
Jakarta - The year 2024 will be the last year of the administration of Joko Widodo-Ma’ruf Amin. So, the government is urged to complete the strategic programmes and projects that have been carried out in the last few years. It is important to ensure that the government transition will go smoothly and continuously.
To work on infrastructure projects in 2024, the government has allocated a budget of Rp422.7 trillion from the 2024 state budget (APBN), which is the highest infrastructure budget in the last five years. The amount is 5.8% higher than the 2023 infrastructure budget realisation forecast that reaches Rp399.6 trillion. Infrastructure budget in 2022 reached Rp373.1 trillion. In 2021, the budget increased by 31.2% to Rp403.3 trillion after decreasing by 22% to Rp207.3 trillion in 2020 from Rp394.1 trillion in 2019.
In the 2024 Financial Note, a sum of Rp213.7 trillion from the infrastructure budget is planned to be distributed to ministries/institutions. The amount is planned to be used to construct regional roads, develop Nusantara Capital City (IKN), renovate stadiums, as well as build educational and health infrastructures. Meanwhile, non-ministerial/institutional expenditure will be allocated Rp20.27 trillion to develop infrastructures in new autonomous regions (DOBs) and support public-private partnership (PPP). Then, a sum of Rp94.8 trillion will be set aside for regional performance benefits (TKD). This fund will be distributed for the special allocation fund (DAK) as well as the infrastructure and general allocation fund (DAU) in the public works sector. Last but not least, Rp93.9 trillion will be allocated to provide state equity participation (PMN) to state-owned enterprises (SOEs) and institutions in the infrastructure sector.
Centre of Reform on Economic (CORE) Indonesia Executive Director Mohammad Faisal said that most infrastructure projects used multiyear contracts, so the Rp422 trillion budget will not only be allocated for projects that commence this year, but also projects that are continued from the previous year.
“It is important for the government to not abandon ongoing constructions. So, the continuity must be ensured,” Faisal said to Investor Daily on Wednesday (8/11/2023). Faisal said that the government has crucial priorities, which include the development of Nusantara Capital City (IKN) that will be accelerated in 2024.
However, he stated that there were some aspects that must be paid attention to in terms of efficiency and governance as the budget is quite large. “So, efficiency is not merely the effectiveness. The government’s budget is limited even though infrastructure is a priority. However, if it is not efficient, it will not be suitable,” he said.
An economic observer from Universitas Indonesia, Telisa Aulia Falianty, said that the government must boost infrastructure development next year even though it is a political year. Infrastructure is still required by the people.
“Capital depreciates. Citizens continuously increase. So, it is impossible to stop or reduce [infrastructure development],” Telisa said to Investor Daily on Wednesday (8/11/2023).
Telisa also said that infrastructure development must provide a larger multiplier effect. Hence, infrastructure development must be supported by human capital development and suitable ecosystems to optimise the utilisation of the constructed infrastructures.
“Infrastructure utilisation is also important. If an infrastructure is merely constructed, the multiplier effect will only last for one cycle,” he explained.
Telisa also revealed that the infrastructure budget for next year that has seen a 5.8% increase was quite substantial given the current economic climate. However, the infrastructure budget allocation must be accompanied by efforts to minimise leaks. Besides that, infrastructure development cannot be carried out at the last minute at the end of the year.
“The budget is enough, but [so that it is optimised], projects cannot be accelerated at the last minute and corruption must be mitigated,” Telisa said.
Telisa also said that infrastructure development should not only absorb workforce, but also meet the local component rate (TKDN). “Infrastructure [development] requires many imported components. Some of them can probably be substituted with our local products and MSMEs (micro, small, and medium enterprises). The procurement of goods must also be boosted so that the TKDN increases. So, the impact on workforce absorption can be optimal,” he said.
Furthermore, Telisa said that infrastructure development through cash for work (PKT) programmes was excellent to support workforce absorption. “Cash for work programmes must be continued. For example, road construction in villages must involve villagers to create jobs so that youths in the village will have an activity and an income,” she explained.
House of Representatives (DPR) Budget Board Member Salim Fakhry revealed that the amount of the infrastructure budget reflected the government’s commitment to completing strategic projects as optimally as possible.
The Golkar politician highly appreciates the administration of Joko Widodo-Ma’ruf Amin that has successfully completed 161 national strategic projects worth Rp1,134.9 trillion. The investment value has allowed for an economic output of Rp1,670 trillion, creating around 4.5 jobs.
President Jokowi, in his speech on the 2024 APBN Draft and the 2023 Financial Note at the Nusantara MPR/DPR/DPD Building in Jakarta on Wednesday (16/8/2023), explained that the infrastructure budget was increased to support the construction of several projects, including Nusantara Capital City (IKN). Besides IKN, Jokowi said that the infrastructure budget for 2024 would be prioritised for the provision of basic services, productivity enhancement through connectivity and mobility infrastructures, and the improvement of irrigation networks through the construction of dams, primary irrigation canals, secondary irrigation canals, and tertiary irrigation canals.
The budget will also be prioritised for the provision of infrastructure in the energy sector, affordable, reliable, and sustainable food, equal access to information and communication technologies, and support for strategic projects.
“Infrastructure development will be accelerated through the mixing of funding schemes. By synergising investment financing and ministerial/institutional expenditure as well as enhancing the role of the private sector,” Jokowi said.
Jokowi explained that the increase in the infrastructure budget is important. Massive infrastructure development is believed to strengthen the provision of basic services, increase productivity, and improve irrigation networks through dam construction.
